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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Barclays in Focus
Based in London, Barclays (BCS) is in the Finance sector, and so far this year, shares have seen a price change of 7.67%. The financial holding company is currently shelling out a dividend of $0.28 per share, with a dividend yield of 3.88%. This compares to the Banks - Foreign industry's yield of 3.7% and the S&P 500's yield of 1.65%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.55 is up 34.1% from last year. Barclays has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 45.32%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Barclays's current payout ratio is 16%. This means it paid out 16% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, BCS expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $2.12 per share, with earnings expected to increase 15.22% from the year ago period.
Bottom Line
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, BCS presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #1 (Strong Buy).